Focus must be on fringe land supply

“Housing Affordability: Focus must be on
fringe land supply” – Demographia

The 2008 4th Edition
Demographia International Housing Affordability Survey
released ( Media Release ) yesterday, found that of the 227
urban markets surveyed - housing in New Zealand and
Australia is the most expensive in the Anglo world. Of the
urban markets surveyed, New Zealanders and Australians can
expect to pay 6.3 times their annual earnings to house
themselves. For the British, 5.5 times, the Irish 4.7, the
Americans 3.6 and the Canadians 3.1 times annual household
earnings.

To rate as “affordable” – an urban market
must achieve an affordability level at or below 3 times
annual household earnings, as is currently the case in 59
North American urban markets (refer Table 5, Page 11,
Demographia Survey). Most urban markets of North America,
Australia and New Zealand were affordable or near affordable
in earlier decades.

“The international evidence is now
abundantly clear that strangling fringe urban land supply is
the core problem” said Hugh Pavletich, co author of the
Annual Demographia Surveys, adding “The only issue now is
in how best to deal with this artificially created political
problem, on a phased basis over a realistic time
frame”.

The fringes act as a “supply vent” or
“inflation vent” of an urban market – and if land
supply is restricted – the prices are inflated, which in
turn ripples through to the rest of the urban market.

To
achieve “affordability”, urban markets must be able to
supply acceptable starter housing on the fringes at 2.5
times the median income of particular markets – as
illustrated within the recent Demographia Sydney & Dallas
Fort Worth Fringe Starter Housing Cost Comparison Study .
where on the fringes of Dallas Fort Worth, new starter homes
of 200 square metres on 500 square metre lots is being
supplied at $US140,000, some $US30,000 for the lot and
$US110,000 for the actual house construction.

For
Australia and New Zealand to restore housing affordability,
new fringe starter homes must be supplied at these figures
over a reasonable and realistic period of time.

“The
evidence is staring us in the face –but sadly - some are
still in a state of denial” said Mr Pavletich, adding
“It’s about time they put up real figures to prove us
wrong, instead of persisting in talking romantic drivel. The
issue is too serious for that nonsense”.

(1) Editorial:
Housing solution lies in tax - 22 Jan 2008 - Opinion,
Editorial and reader comments from New Zealand and around
the World - nzherald (2) Prime Minister takes issue with
house-cost findings - 22 Jan 2008 - Residential property
news - NZ Herald (3) Scoop: Labour should hang head in
shame over housing – Mr Phil Heatley, New Zealand National
Party Housing Spokesman. (4) Scoop: New Zealand
Lifestyle Block Mythology . A useful guide in gauging
whether we have sufficient land in New Zealand. It is
extremely important to clearly understand “fact” from
“fiction” on this issue. (5) Hugh Pavletich will be
releasing a paper “Getting Performance Planning in
Place” by the end of February. This will build on his
recent Open Letter to New Zealand Housing Minister . (6)
Note to Media: Use of the Tables and Graphs (and any other
information for that matter) contained within the
Demographia Survey – with attribution - is
encouraged.

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